FraudTalk is a blog focused on the review and discussion of recent significant cases of fraud, corruption and employee misconduct - particularly major embezzlement cases in the US. Fraud Talk is published by Chris Marquet, Chairman & CEO of Marquet International Ltd., an international investigations, litigation support and due diligence firm.

Saturday, February 28, 2009

Robert Joseph Nawn Jr., of Havertown, Pennsylvania, was arrested and charged yesterday for allegedly embezzling some $386,000 from Delta-T Group, for which he served as the chief financial officer. According to investigators, Nawn, who had complete access to the company's accounting system and bank account access, used company vendor ID numbers to create fake invoices that were paid by the company and the funds deposited into his own account. In all, Nawn alleged caused 133 fraudulent checks to be issued. Specifically, he was charged with five counts each of theft by unlawful taking, theft by deception, receiving stolen property, forgery, identity theft, criminal use of communication facility, and unlawful use of computer and other computer crimes.

Hamilton Manufacturing Inc., of Twin Falls, Idaho, has filed a civil suit against its former controller, Robie Kendall Probasco, 47, and his wife, Kelly M. Probasco, 47, to recover the $306,030 allegedly embezzled from the company, plus 12 percent interest. The Probascos, who reside in Pocatello, Idaho, had filed for personal bankruptcy in 2002 - something which was not disclosed to the company when Robie was hired as controller in 2003, according to the suit. The complaint makes specific allegations of embezzlement, fraud, forgery and theft, wherein Robie Probasco is alleged to have forged the CEO's name on checks deposited into their accounts. They control an entity, Probasco Diversified Inc., which apparently is the vehicle through which funds were transferred. The company has referred the matter to the police for investigation and possible prosecution. A judge has frozen the Probasco's assets including vehicles, real property and a bank account.

Jeffrey Tarpley, 48, and the former aquatics director for the City of Walnut Creek, California, was sentenced Friday to 90 days in jail, plus five years probation for embezzling more than $150,000 from program coffers. Tarpley plead no contest in November to the thefts and has agreed restitution. He had been employed by the city for 19 years and was fired after his arrest in 2007. Tarpley told the judge at yesterday's sentencing hearing that he stole the money because of financial pressures caused by his wife's health problems. According to prosecutors, the thefts ocurred between 2000 and 2007 wherein Tarpley transferred rental fees paid by users of the city's two pools into his own bank accounts.

Thomas John Hastert, 53, a former sheriff's deputy in California turned real estate broker, was arrested Thursday at his daughter's home in Santa Cruz, California and charged with bilking investors out of as much as $20 million. Hastert was charged in Nevada County Superior Court with 73 counts of embezzlement, securities fraud, conspiracy and filing false documents in the alleged defrauding of some 123 investors and borrowers. He was a former deputy sheriff in Los Angeles and Nevada counties, according to reports.

Friday, February 27, 2009

Maureen Njideka Edu, a/k/a Maureen N. Scurry, 42, of Potomac, Maryland, was indicted Tuesday on charges she solicited and received a $100,000 bribe while she was employed by the Export-Import Bank of the United States ("Ex-Im Bank") as a business development specialist covering Africa, including Nigeria. Specifically, Edu was indicted on felony counts of bribery, honest services fraud, wire fraud and filing a false tax return. According to the indictment, Edu received a $100,000 "down payment" on a promised bribe of $173,500 to help a Nigerian businessman win a $44 million deal with iGate Inc., a Kentucky-based technology company. The deal never was consummated, but it was also one that was being promoted by now disgraced congressman William Jefferson (D-LA), who is facing a May trial. IGate president, Vernon Jackson is currently serving a prison sentence for paying bribes to congressman Jefferson.

Mark J. Harrington, 52, of West Roxbury, Massachusetts and the former controller of Boston-based Anchor Capital Advisors, was indicted today on charges that he embezzled some $368,000 from the company's 401(k) plan. Harrington, acting with an accomplice, Carmine P. Arenella transferred the funds over a six month period, to two bank accounts associated with an adult escort business the two were involved in, according to investigators. He faces up to five years in prison, plus a fine of $250,000 and restitution.

Judith Zabalaoui, 71, a longtime financial planner based in New Orleans, Louisiana and now residing in Birmingham, Alabama, admitted in a plea agreement last week that she had embezzled some $3 million in client investor funds in a scheme involving two fraudulent companies she set up - Paragon Company and Omni Clearing. She had promised returns of between 13 and 26 percent. Zabalaoui's fraud started as far back as 1993, according to prosecutors and she has agreed to pay $3 million in restitution. Instead of investing the money, she used it to pay earlier investors as well as on herself and her family.

Heidi C. Laughery, 46, of Meadville, Pennsylvania and the former CEO of Parkersburg, WVA-based Sequelle Communications Alliance Inc., is scheduled to enter into a plea agreement with prosecutors tomorrow in a case in which she and other executives allegedly conspired to misappropriate some $4 million from the company. Laughery, who was CEO from August 2000 to March 2005, was indicted last August on charges of "frauds and swindles," bribery involving federal programs, money laundering and embezzlement. Her trial had been scheduled to begin next week. Three other individuals were allegedly involved in the fraud: James Larry Hymer, former CFO of Mentorgen LLC, an engineering firm that did contract work for Sequelle; and R. Scott Truslow, founder of Truscom LLC, another vendor of Sequelle. One way she defrauded the company was by obtaining loans with fraudulent applications. Sequelle is now defunct.

We note that Laughery was convicted in 1987 in California on wire fraud charges stemming from an embezzlement of some $130,000 in client funds from Merrill Lynch for whom she had worked as a financial consultant and broker. Laughery also had a 2001 personal bankruptcy filed in Ohio.

Next week has been proclaimed "Problem Gambling Awareness Week" in the State of Florida by Governor Charlie Crist. The Florida Council on Compulsive Gambling has joined with the governor and other officials across the state to bring awareness to the problems caused by compulsive gambling. The FCCG maintains a hotline for compulsive gamblers and compiled a study based on caller interviews. The study revealed the following:• Almost one in every three callers (30%) admit to committing illegal acts to finance their gambling, committing crimes that are linked to money.• Almost two out of three callers (62%) reported committing fraud, writing bad checks or forgery• One out of five callers (21%) stated they had embezzled money for employers• One out of five callers (21%)claimed to have committed larceny or theft against friends, family members or strangers• One out of 14 callers (7%) stated they had been involved with other illegal activities such as selling drugs, prostitution, illegal gambling (booking) and others

Sonia Renee Coleman, 28, of Fort Washington was charged Monday with allegedly embezzling some $236,000 from the D.C. Water and Sewer Authority, where she had been employed in the accounting department as a payroll clerk. According to prosecutors, over the course of one and a half years, Coleman would increase the salary of fired or on-leave employees and then change the direct deposit information so that the extra funds would be transferred to her own and to an unnamed friend's account. She would then destroy the payroll stubs to conceal her actions, according to the complaint.

Kyle Dustin Foggo, 54, of Vienna, Virginia and the former executive director of the Central Intelligence Agency, was sentenced to 37 months in prison for defrauding the government. Foggo, who is commonly known as Dusty Foggo, pleaded guilty to one fraud count and prosecutors dropped 27 others in a plea agreement last year. Foggo reportedly received "tens of thousands of dollars" worth in gifts and luxury vacations from his friend and contractor, Brent Wilkes, in exchange for steering multimillion-dollar contracts to Wilkes. The scheme allegedly went on for years. Foggo also allegedly attempted to get his mistress hired by the CIA at a six-figure salary for a job for which she was unqualified. Wilkes was sentenced to 12 years in prison last year for paying bribes to government officials in return for contracts. Wilkes also paid bribes to former congressman Randy "Duke" Cunningham (R-CA), who was sentenced to 8 years in prison for accepting the bribes.

Samim S. Anghaie, 59, and a professor at the University of Florida, along with his wife, Sousan F. Anghaie, 54, both of Gainesville, Florida, are alleged to have bilked NASA and other government agencies out of as much as $3.4 million in fraudulently obtained contracts. Samim Anghaie is the founder of UofF's Innovative Nuclear Space Power and Propulsion Institute which obtained funding from various government agencies, including NASA. Prosecutors allege that the Anghaie's set up a company, New Era Technology or NETECH, with Sousan Anghaie as its president. While neither has been arrested or charged yet, their home and offices were raided by the FBI. According to court documents, NETECH submitted fraudulent proposals and since 1999 obtained $3.4 million in contracts with NASA, the Air Force and the Department of Energy. The filing also alleged that some of these funds were transferred to the couple's sons, Ali Anghaie and Hamid Anghaie. The misappropriated funds allegedly went to support a lavish lifestyle and to purchase real estate, luxury vehicles and other personal items. Samim has been placed on administrative leave with pay by the university. The government filed a motion seeking to seize six cars, six pieces of real estate in Fort Lauderdale, Gainesville, and Tampa, Florida and Manchester, Connecticut, along with several bank accounts.

Update (2/26/11): Samim Anghaie, now 61, and his wife, Sousan Anghaie, now 56, were convicted by a federal jury on charges they defrauded the government out of more than $3 million. Samim was convicted on 28 counts of conspiracy and wire fraud; Sousan was convicted on 26 similar counts.

Thursday, February 26, 2009

Laura Pendergest-Holt, 35, and the CFO of Stanford Financial Group, Inc., based in Houston, Texas, has was arrested today and charged with "obstruction of a proceeding before an agency of the United States." According to the complaint, Pendergest-Holt made "several affirmative misrepresentations" to the SEC in order to obstruct its investigation into the alleged fraud involving the company.

The Financial Industry Regulatory Authority, commonly known as FINRA, issued an Investor Alert, warning of a variety of investment fraud schemes, including Ponzi schemes, pyramid schemes, "pump and dump" scams, advance fee frauds, and offshore investment frauds. The alert describes a number of psychological approaches investment fraudsters commonly use as well as outlining some of the "red flags" to watch out for. These include:

Paul Greenwood, 61, of North Salem, New York and Stephen Walsh, 64, of Sands Point, New York and both principals of WG Trading Company, a money management firm based in Greenwich, Connecticut and Westridge Capital Management, based in Santa Barbara, California, were charged today with conspiracy, securities fraud and wire fraud in connection with an alleged investment fraud scheme that bilked investors out of as much as $550 million over many years. According to prosecutors, the two, who were once part owners of the New York Islanders professional hockey team, allegedly used client money as "their personal piggy-bank" to fund lavish lifestyles. Further, the complaint alleges the scheme began in 1996 and continued to this month. Of the $667 million that clients invested, Greenwood and Walsh misused at least $554 million, the complaint alleges. Greenwood and Walsh are alleged to have used company funds to buy horses and pay for personal expenses ranging from Manhattan apartments to expensive collectibles. A former WG Trading employee, Mark Bloom, who now operates North Hills Management LLC was also arrested yesterday on fraud charges.

Scott D. Becker, 48, of Meriden, Kansas and the former president of Countryside Bank in Meriden, together with Stephanie R. Smith, 33, of Meriden and a former vice president of the bank, were indicted with a third conspirator in the alleged embezzlement of more than $2 million from the bank. A third defendant, Michael W. Wurm, 47, of Meriden, was also named in the complaint. Wurm is alleged to have been a contractor with the bank and participated in the embezzlement scheme. Becker and Smith were terminated by the bank after a bank regulator report exposed irregularities. According to the complaint, starting in 1999, Becker, with the help of Smith obtained fraudulent loans that he benefited from personally.

Gene Paul Boyd, 62, of Leawood Village, Missouri, was charged Monday with embezzling at least $325,000 and perhaps as much as $1 million from the Leawood Village coffers, where he had served as treasurer for many years. In an affidavit filed with the court, Boyd reportedly confessed to stealing money from the village for as long as 21 years. Investigators have documented $325,210 in losses from 2004 to 2008. However, another $673,534 in village funds is still unaccounted for. Boyd started serving as treasurer in or about 1978. Details on how Boyd accomplished his alleged thefts have not been released, but investigators claim he provided falsified bank statements to cover up the losses.

Wednesday, February 25, 2009

Michael T. Harrington, 44, of Lee's Summit, Missouri, a former General Services Administration accounting supervisor, pleaded guilty yesterday to embezzling $593,549 from the agency between May 2006 and May 2008. Harrington, who had been indicted October 30th on 4 felony fraud counts, created a phony business, issued 13 fraudulent government refund payment vouchers, and deposited the funds into a bank account in the name of that business. He faces up to 20 years in prison, plus a fine of $500,000 and restitution.

Tuesday, February 24, 2009

U.S. District Judge Samuel B. Kent, 59, pleaded guilty today to obstruction of justice by making false statements to a special investigative committee of the U.S. Court of Appeals for the Fifth Circuit. The special investigative committee was investigating a judicial misconduct complaint against Kent that alleged he assaulted two female employees. Kent, who sat on the bench in the Southern District of Texas, had been charged with three counts of abusive sexual contact and two counts of aggravated sexual abuse. Those charges will be dropped and prosecutors will recommend that he serve no more than 3 years in prison for the obstruction count. He has reportedly retired from the bench. Sentencing is scheduled for May 11, 2009.

The trial for Steven B. Smith of Blue Jay, California and a former Federal Aviation Administration technician and his half brother, Bradley Alexander George Garner, a Canadian citizen residing in southern California, on charges they stole some $3 million worth in "excess property" overseen by the U.S. General Service Administration, is set to commence. The pair were each indicted this month on wire fraud and theft of honest services counts in the alleged theft of more than 200 items of government property over a four-year period, including a 50-foot yacht, a Cessna airplane, a 44-foot yawl, ski boats, trucks, trailers, heavy equipment, tools, computers and other valuable equipment. Some of which they sold and other they kept for their own use. According to prosecutors, the scheme began in late 2004, when Smith improperly gained an access code to a GSA Web site where excess property from across the federal government is listed and procured equipment ostensibly for the FAA, but in fact for himself and Garner. The scheme continued until February 2008 when an official became suspicious and reported Smith to internal authorities. Following a joint GSA and FBI investigation, a raid conducted in November 2008 seized more than $1 million in stolen vehicles, boats and other equipment and Smith and Garner were arrested.

Alabama state representative, Sue Schmitz (Democrat-Toney, AL), was found guilty by a jury on seven felony fraud counts this morning at her second trial. Schmitz, 63, was originally charged with four counts of mail fraud and four counts of fraud for getting paid by a federally funded program without doing any work. The first trial ended in an 11-1 deadlock on one count of the indictment, forcing a second trial. She allegedly used influence to obtain a job as program coordinator for community and external affairs with the Community Intensive Training for Youth ("CITY") program and was paid a total of $177,251 from January 2003 to October 2006, doing little or no work.

Sheila Marie Guerra, 40, of Albert Lea, Minnesota, was charged with embezzling $160,500 from Northstar Power Sports and Marine, where she had been employed as a bookkeeper. Specifically, she was charged with one count of "felony diversion of corporate property" and one count of felony theft. According to authorities, Guerra embezzled in several manners, including transferring funds to a PayPal account in her husbands name, transferring it to another PayPal account and then withdrawing the funds with a debit card. When confronted by police, Guerra reportedly admitted partially to the thefts which occurred over a one year period to feed a gambling problem. She faces up to 20 years in prison, plus a fine of $100,000 and restitution.

Melody A. Owens, 40, of Fuquay-Varina, North Carolina, was sentenced to 27 months in prison, plus restitution for embezzling $269,447 from her former employer, BB&T, an insurance & financial services company based in Winston-Salem. Owens, who worked for the company for 12 years, began stealing money from the cash box in 1999, according to prosecutors. She covered up her thefts by creating false "cash out" tickets which she signed as an authorized bank official. Owens pleaded guilty to the embezzlement last October, admitting to more than 200 fraudulent transactions and 400 false documents.

Dorothy A. Horvath, 50, of Campbell Hall, New York, was arrested Sunday night on charges she embezzled some $130,000 from her former employer, Chambers Tractor Sales Inc. According to prosecutors, Horvath, who was the company's bookkeeper responsible for the daily cash deposits, among other things, simply took cash from the bank bag before depositing it. The thefts reportedly took place approximately over a 2 year period until last fall. The embezzlement was uncovered after vendors complained about not getting paid and an internal audit was conducted. Her actions nearly bankrupted the company, according to investigators.

Rhonda L. Hastings, 40, of Holliston, Massachusetts, was sentenced to 2 1/2 years in prison followed by 2 1/2 years of home confinement for embezzling some $540,000 from the Dollar Depot Plus stores in Pawtucket, Rhode Island, where she had been employed as a bookkeeper. Hastings, who pleaded guilty to one count of "unlawful appropriation of more than $1,000" and one count of "access to a computer for the purposes of fraud," was also ordered to pay restitution. According to prosecutors, Hastings, who worked for the company for 20 years, stole from the company from January 2004 until November 2005. She was arrested in February 2006. She allegedly used a line of credit held by one of the company owners, to cover the cash shortfalls. The money was spent to support a lavish lifestyle, including purchasing a farmhouse in Holliston with numerous dogs and livestock, making renovations to the property, and purchasing a motorcycle and other vehicles for herself, a boyfriend a others. She also allegedly purchased gifts for Dollar Depot Plus employees as "hush money," including tickets to sporting events, parties and even an automobile. The company owners, Joseph and Joann Pietrantonio, said that they had treated Hastings like a daughter. They reported that she feigned stage 4 cancer when they began asking questions about the finances and asked for documentation. The thefts had such an impact on the company that they had to close 2 stores to stay in business. The Pietrantonios have filed a civil suit against Hastings as well as against Bank Rhode Island and their accountant to try to recover some of the stole funds.

Monday, February 23, 2009

Fredric “Rick” Dryer, 60, and the founder of Denver, Colorado-based Mile High CapitalGroup, LLC, was sentenced to 132 years in prison for operating a Ponzi-type investment fraud scheme. Dryer was convicted last July on 44 felony counts including securities fraud, theft and violation of Colorado’s organized crime laws related to the now-defunct Mile High Capital, purportedly a real estate investment firm. He was also ordered to pay $3.4 million in restitution to the victims of his fraud. Mile High Capital and two related entities attracted investors to purchase duplexes and resell them for a profit, promising as much as 12 percent returns. The company filed for bankruptcy and prosecutors allege that some 1,000 investors lost as much as $35 million. Two of Dryer's associates were also indicted in this case, Jeffrey Dietz, 36 and Richard Darrow, 41. Dietz ran Replacement Property Solutions Inc., a Mile High related entity.

We note that Dryer is a previously convicted felon, having been charged in a bank robbery in 1971 and two other securities fraud cases in the early 1980s.

Walter Sanders, of Mesquite, Texas and the owner of Waltco Medical Equipment & Supplies, was sentenced to 5 years in prison for paying kickbacks to suppliers who submitted fraudulent patient claims for wheelchairs provided by Waltco. Sanders was also ordered to pay more than $800,000 in restitution. Sanders' ex-wife, Geneva Sanders, of Memphis, Tennessee, was also found guilty in the scheme. She was employed as a secretary at a Memphis, Tennessee hospital and obtained patient identifying information that she provided to Sanders who used the information in the scheme. She was sentenced to 16 months in prison and ordered to pay $133,000 in restitution.

George F. Alinsod, 58, of Parkville, Maryland, was sentenced today to 3 years in prison and ordered to pay more than $200,000 in restitution to the University of Maryland, Baltimore County, where he had been employed, for accepting bribes and kickbacks from university contractors and suppliers. According to prosecutors, Alinsod's scheme spanned a five year period. He pleaded guilty last year to soliciting bribes and procurement fraud. Alinsod is one of several individuals who have been involved in defrauding the university. He was the construction manager for the university.

Sue Nanda, 40, of Costa Mesa, California pleaded guilty Friday to felony charges of conspiracy, recruiting patients for fraudulent surgeries, failing to file tax returns, filing fraudulent tax returns and grand theft "with an enhancement for white-collar crime," for her role in what is being described as the largest medical insurance fraud case in US history. Nanda is one of 19 defendants charged with bilking some $154 million from medical insurance companies in California by performing unnecessary surgeries on patients. Nanda has been described as a "capper" or recruiter, of patients who she would then arranged to travel to and receive the fraudulent procedures from the Unity Outpatient Surgery Center in Buena Park, California. The purported mastermind of the scheme, Tam Vu Pham, pictured here, has been sentenced to 12 years in prison.

Angela B. Britt, 47, of Clinton, Mississippi, was sentenced to ten years in prison with eight suspended, for embezzling some $200,000 from the Land Bank South in Flowood, Mississippi,where she had been employed. Britt was also ordered to pay restitution for her thefts, which spanned a 2 1/2 year period between 2005 and 2007.

George J. Guzzie, 47, of Upper Dublin, Pennsylvania, was sentenced to up to 23 months in jail for embezzling some $200,000 from VLBJR Architects Inc. in Norristown, where he was a partner and shareholder as well as handled the function of bookkeeper for the company. Guzzie was also ordered to pay restitution in that amount. According to prosecutors, Guzzie stole the money between 2003 and 2007, in order to fuel a gambling habit.

Rodrigo Sabastian Alonso, 38, of Tiburon, California, was arrested Friday on charges he allegedly embezzled some $200,000 from an unnamed Novato, California-based company. Details are sketchy on this case at this point, but Alonso reportedly stole the money over a period of several years.

Anthony L. Lopez, Jr., 34, of Sandown, New Hampshire, was sentenced to 30 months in prison, plus restitution for embezzling nearly $500,000 from his former employer, NER Construction Management, Inc. of Wilmington, Massashusetts. According to prosecutors, Lopez, who served as an accountant for the company, fraudulently obtained checks payable to seven fictitious entities controlled by Lopez and three co-defendants over the period from January 2003 to March 2005. The three other co-defendants, Russell G. Lecaroz, Jr., 36, James L. Plourde, 47, and Donald G. Wilson, Jr. , 36, have all plead guilty and are awaiting sentencing in this case.

Saturday, February 21, 2009

Anna Roberts, 60, of Prospect, Connecticut, has been charged with first-degree larceny in connection with the alleged embezzlement of more than $250,000 from the Key Auto Group where she had been employed as controller. Since April 2007, Roberts allegedly took both check and cash deposits for her own benefit, according to authorities.

Friday, February 20, 2009

Barbara Eileen Kurz, 70, of Mesa, Arizona, was arrested yesterday at her home 26 years after she disappeared amidst an investigation into her allegedly embezzling $106,000 from the Tri-City Medical Credit Union where she had been employed. Kurz' abandoned, partially burned car was found in Oregon after her disappearance. She reportedly left behind a husband and four children. According to investigators, Kurz had adopted an alias, Renee E. Fulgham, kept her true birthdate and had changed her social security number by one digit. She had allegedly robbed the safe at the credit union on Valentines Day, 1983. She is being held on a $500,000 bond.

Thursday, February 19, 2009

Bruce E. Hammonds, 49, of Boerne, Texas and a former stockbroker with Merrill Lynch & Co. in San Antonio, Texas, plead guilty to charges he took more than $1 million in client investments for his own benefit. Hammonds admitted that over the course of approximately 2 years, beginning in 2006, he transferred client investment funds to a partnership he controlled without their knowledge or authorization. Instead, he used the money for himself and his family, according to prosecutors. Hammonds faces up to 10 years in prison.

Wednesday, February 18, 2009

Diane M. Apostoloff, 41, of Hobart, Indiana, was sentenced today to two years and nine months in prison for embezzling some $660,000 from Harris Bank, N.A. in Valparaiso, Indiana, where she had been employed as a bank manager. Apostoloff admitted that she stole the money between 2006 and 2007 to support a gambling habit and because she suffered from severe depression, anxiety and loneliness, according to court testimony.

Judith Kaye Power, 52, of Isleton, California, was sentenced to 2 1/2 years in prison plus restitution for embezzling some $468,000 from Steamboat Orchards, a pear farm in Walnut Grove, California. Power had been employed as a bookkeeper with responsibility for handling payroll. She plead guilty in November to one count of making and uttering a forged instrument, admitting that from October 16, 2001 to May 31, 2006, she had forged payroll checks and deposited them into her personal banking account. She had also inflated her time cards to earn extra pay, according to the complaint.

Richard Garaventa Jr., 36, of Manalapan, New Jersey and a former vice president of Morgan Stanley, pleaded not guilty to charges he embezzled some $2.5 million from the investment bank. Garaventa allegedly stole the money by setting up a phony company, New York Transfer Corp., to which he sent at least 50 unauthorized checks of as much as $75,000. He has been charged with 43 criminal counts, including grand larceny, possession of stolen property and falsifying business records. According to prosecutors, Garaventa spent the money to maintain a lavish lifestyle on such things as luxury vehicles, jewelry, expensive vacations and other personal items. The scheme took place over a period of 7 years, according to reports. He faces up to 25 years in prison if convicted.

Lynda King, 40, of Pine Bluff, Arkansas, pleaded guilty yesterday to embezzling some $884,000 from the Pine Bluff School District where she had been employed as a secretary for ten years. King was charged with 1,152 counts of theft and forgery, in a scheme in which she allegedly issued fraudulent purchase orders to a phony vendor she created and then issued unauthorized checks which she was able to deposit into her own accounts. The scheme went on for 7 or 8 years, according to reports.

Robert Allen Stanford, 58, of Houston, Texas and the billionaire chairman of Stanford Group Company, has been charged by the Securities & Exchange Commission in a civil suit, of defrauding investors about the level of risk and liquidity associated with as much as $8 billion in certificate of deposit investments. Two executives of the company, James Davis, CFO and Laura Pendergest-Holt, chief investment officer, have been charged along with Stanford. Stanford Group operates out of Houston and Antigua, where Stanford's offshore banking operation is located. In addition to Stanford Group, Stanford International Bank, Ltd. of Antigua and Stanford Capital Management, LLC, were named in the complaint. Stanford has not yet been detained and his whereabouts are not known at this point.

Tuesday, February 17, 2009

Vickie "Renae" Maxwell, 43, of Sherwood, Arkansas, and the former office manager for the publisher of the Oxford American, has been charged with embezzling $104,000 from the magazine. Maxwell, who has plead not guilty, was charged with theft and forgery. She allegedly issued company checks to herself and forged the signature of an authorized account manager. The embezzlement took place over a five month period, according to investigators. She faces up to 30 years in prison if convicted.

Gerardo Chavez, 46, of Clifton, Virginia, and a former U.S. Immigration and Customs Enforcement official, was sentenced to 90 months in prison for accepting $172,000 in bribes from a Venezuelan armored car company in exchange for a $2.8 million contract. Chavez, who had served as deputy assistant director of international operations, steered the contract to Blindajes Del Caribe of Caracas, also known as Blincar, which manufactures 4-wheel drive armored cars. Chavez reportedly used the money to make home improvements, buy land in California and a 2006 Hummer.

John W. Goff, 60, of Montgomery, Alabama, was found guilty by a jury on 23 counts of mail fraud, one count of embezzlement and one count of filing a false report in connection with the embezzlement of some $4 million in insurance premiums intended for Greenwich Insurance Co. and XL Specialty Insurance. Goff's company, Goff Group, offered worker's compensation insurance. Goff reportedly used the money to himself a $1 million salary, buy a private plane, a beach house and other real estate investments. He faces up to 30 years in prison, plus fines up to twice the amount embezzled.

Valeda F. Talamini, 37, of Bellingham, Massachusetts, plead guilty recently to charges she embezzled more than $90,000 from Rosewood Development in Marlborough, Massachusetts. Over a 2 1/2 year period, Talamini wrote checks to a company her husband, Richard Talamini, owns, "Rick's Quality Painting," according to prosecutors. She was employed in the accounting department, handling payroll, accounts receivable, accounts payable and other finance matters. Talamini must pay restitution of $140,000.

Tracey Totten-Davis, 41, of Coatesville, Pennsylvania, was arrested on 90 counts of theft, receiving stolen property and unlawful use of a computer, in connection with the alleged embezzlement of nearly $500,000 from Hollow Run Apartments in West Chester over a 7 year period. Totten-Davis allegedly took rent money and security deposits and transferred them to her own accounts. The scheme also involved a dummy company she set up, Choice Cleaning, allegedly for cleaning services, but actually controlled by Totten-Davis, to which monies were sent, according to investigators. Totten-Davis reportedly was a big gambler and also may have spent some of the money on home improvements.

Raquel A. (Labao) Richard, 29, of Fall River, Massachusetts, was charged today with embezzling $130,000 from New England Hearth and Patio, where she had worked as a bookkeeper handling payroll. Richard allegedly began transferring funds to her own accounts starting in 2007. The scheme went on for some 15 months, according to police. Richard had a 2005 criminal conviction for writing 37 fraudulent checks totalling $67,000 when she worked for Propane Plus in Rehoboth, Massachusetts.

Saturday, February 14, 2009

Kyle David Williamson, 41, of Bettendorf, Iowa and a former Scott County judge, reached a plea agreement on charges of bank fraud, forgery and two counts of aggravated identity theft. Two other charges were dropped. According to the criminal complaint, Williamson fraudulently obtained bank loans and lied about a wrongful termination suit. He resigned from the bench last September and faces up to 44 years in prison.

Authorities seized the contents of a safe deposit box in Phoenix, Arizona belonging to mortgage fraud suspect, Christopher J. Warren yesterday. It contained 276 gold coins worth more than $400,000, some dating back to the California gold rush era. Warren was apprehended at the New York border trying to re-enter the US after fleeing the country amid the massive mortgage fraud investigation surrounding him and Loomis Wealth Solutions of Roseville, California. At the time of his arrest, Warren had $70,000 in cash stashed in his boots and was carrying 4 ounces of platinum worth about $7,000, according to authorities.

Tina Moholland, 37, of Calais, Maine, pleaded guilty yesterday to embezzling $197,000 from the Calais Day Treatment Program, which is administered by the town's School Department, where she worked as a secretary, receptionist and bookkeeper. According to prosecutors, Moholland deposited tuition checks into her own personal accounts over a three year period beginning in 2004. The Calais Day Treatment Program obtains grants from the state and is designed to help troubled children. The thefts involved at least 29 checks made out to the program which she deposited into her accounts at Bangor Savings Bank and Gardiner Savings Institution, according to the complaint. Moholland had been an employee at the agency for 7 years. The checks were apparently made out to the agency as well as to her. The bank finally refused to deposit the checks and notified authorities. When confronted by police, she confessed to the thefts. According to police, Moholland has had minor scrapes with the authorities in the past. In 1994, she was charged with "theft by unauthorized taking or transfer" in Calais and fined $100. In 1998, Moholland’s ex-boyfriend was charged with burglary and assault after he broke into her house, grabbed her and threw her against a wall in an attempt to make her leave the residence. In 2001 she paid a $100 fine for failure to register a motor vehicle. Moholland faces up to 10 years in prison upon sentencing. The agency was made whole by $10,0000 in insurance money and the Bangor Savings Bank, which agreed to repay the rest.

Friday, February 13, 2009

Victoria Ann Pehringer, 35, formerly of Belgrade, Montana, was sentenced to 10 years in prison for embezzling nearly $345,000 from her former employer, Rocky Mountain Supply, a ranchers supply store. According to court documents, from May 2000 to December 2005, Pehringer regularly altered the store’s sales journals and took cash from daily deposits. The thefts nearly bankrupted the company, according to its general manager, Doug Klotthor. Upon sentencing, Pehringer apologized for her actions and claimed she would make restitution. She previously plead guilty to the charges claiming she stole the money to support a drug habit that included methamphetamine, cocaine and painkillers. Prosecutors claimed it was the largest embezzlement case in Gallatin County history.

Jackie Louise Borovetz, 57, of Muskogee, Oklahoma, the former deputy clerk and bookkeeper for the Muskogee County District Court Clerk’s Office, pleaded guilty today to embezzling nearly $600,000 from the court. Borovetz, who pleaded guilty to one count of wire fraud, admitted that she funneled monies from court coffers to her personal bank account between November 2007 and September 2008. She reportedly stole the money to support a gambling addiction. Prosecutors contended that $$595,253.32 was stolen by Borovetz in a scheme whereby she took fees and fines due the county, set up a bank account at a local Bank of America under the name "Jackie Borovetz Sole Prop DBA The Research Specialists,"and deposited the checks for her own benefit. Prosecutors also alleged that Borovetz utilized a number of aliases, including: Jackie Louise Skinner, J. Louise Thompson, Jackie L. Skinner, J.L. Skinner, J.L. Holder, Jackie Thompson and Jackie L. Thompson.

Paul Timothy Moore, 61, of Columbia, South Carolina and the former finance director for the state Department of Social Services, was formally indicted yesterday on charges he embezzled more than $5.2 million from the agency using a scheme to recruit others to cash checks and then split the proceeds. Five others were indicted along with Moore as co-conspirators in the scheme, including Herbert McKie, 27, Tyra L. Goodson, 36, Nova Kathleen Johnson, 40, and Sandra Denease Smith, 45, all of Columbia; and Calandra Fabary Thomas, 38, of Aiken, S.C. According to the indictment, Moore caused 761 checks to be issued between May 2004 and October 2008, in amounts of about $7,000 which were cashed by the co-conspirators.

Lisa A. Farel, 40, of Cherry Valley, Illinois, was sentenced recently to 43 months in prison for embezzling some $1.1 million from the Rock Valley Federal Credit Union where she had been employed as a card services coordinator, over a 15 year period. Farel incrementally inflated the balances on 73 dormant credit cards and siphoned off the difference beginning in 1993 until last year, according to the criminal complaint. Farel reportedly confessed to the thefts and claimed she spent all of the money over the 15 year period, but could not account for it.

Ralph Peters, 48, of Clovis, California, was sentenced yesterday to one year in prison for embezzling some $234,000 from the Fresno Unified School District, for which he had served as a "budget technician" for more than 10 years. According to prosecutors, Peters forged purchase orders to buy books, supplies and other items for his personal benefit and in some cases, sold the items to others. According to the complaint, the thefts occurred between July 1997 and October 2005. Peters reportedly admitted the thefts when they were uncovered by a co-worker and signed a confession. He plead no contest to a single felony count of grand theft and must also make restitution in the amount of $196,000.

Kellogg Brown & Root, formerly a wholly owned subsidiary of Halliburton Corporation and based in Houston, Texas, agreed yesterday to pay a $579 million fine to settle charges it had violated anti-bribery provisions of the Foreign Corrupt Practices Act. Prosecutors alleged that the company had spent $182 million to bribe government officials in Nigeria in order to win $6 billion in construction contracts over a ten year period. Halliburton will be responsible for paying all but $20 million of the fine since it owned the company during the time of the violations. Kellogg Brown & Root (KBR) was spun off by Halliburton in April 2007. KBR's former chairman, Albert "Jack" Stanley, plead guilty to FCPA violations last year.

Rickey Weir, 61, of Springfield, Illinois, pleaded guilty today to felony healthcare fraud charges. Weir who was originally charged on 16 counts of mail fraud, plead guilty to a single count, admitting that he conspired to bilk the government, insurance plans and patients out of more than $800,000. Weir, the business manager for Cardinal Respiratory, Inc. in Springfield, IL, double billed for medical supplies over a 10 year period, according to prosecutors. Weir was also suspected of transferring at least $300,000 to overseas accounts. He faces up to 10 years in prison plus a fine of $250,000. Cardinal Respiratory is owned by Weir's estranged wife, Dr. Janet Despot, an allergist. She previously pleaded guilty to a misdemeanor charge of "balance-billing" Medicare patients and agreed to pay $2.8 million in fines and restitution.

An unnamed administrative assistant at Des Moines, Iowa-based Principal Financial Group is suspected of embezzling some $100,000 through the misuse of corporate credit cards, according to reports. Details on the case have not been released and no arrests have yet been made.

Raul Martinez Sandoval, 50, of Phoenix, Arizona, was arrested Tuesday for allegedly embezzling some $117,000 from his former employer, Cambridge Filter Corp. of Gilbert, Arizona. Sandoval, who worked as an accountant for the company, used company credit cards for his own benefit and arranged to get a second paycheck each pay period between April 2006 and June 2008. He was charged with six felony embezzlement counts and identified as a flight risk due to the fact that he has a Mexican identification card and visits relatives across the border frequently. Sandoval reportedly admitted the thefts and used the stolen funds to, among other things, buy a truck, pay tuition for his daughter and make investments.

Christopher Meyers, 46, of Mamaroneck, New York, pleaded guilty last week to embezzling nearly $300,000 from the estate of one of his clients and from several other clients. Meyers was disbarred early last year amid the investigation into charges of grand larceny and tax fraud. He has been ordered to make restitution to his clients and to pay nearly $20,000 in back taxes.

Nancy Frances Fiske, 57, of Anderson, California, was sentenced to 33 months in prison for embezzling more than $1.3 million from her former employer, Jerry L. Knighten Construction, Inc. Fiske plead guilty last September to one felony count of mail fraud. According to prosecutors, Fiske had been employed as a bookkeeper, controller and office manager for the company and embezzled the money between 2001 and 2007. Fiske was able to use her fiduciary positions to write more than 500 checks to herself and others. Fiske must also pay restitution in the amount of $1,227,563. The complaint also alleged that Fiske attempted to cover up her thefts by making false ledger entries.

Thursday, February 12, 2009

Amy Lynette Sanders, 37, pleaded guilty today to embezzling some $171,000 from the Independent Bank in Grand Rapids, Michigan, where she had been employed as an Assistant Vice President. Sanders, who was arrested last December, admitted that she transferred the funds in certificates of deposit, to her own account over a period of about 3 1/2 years until late 2007. Sanders and her husband, Jeffrey Sanders, were going through a Chapter 13 bankruptcy during the time of the thefts from the bank. She faces up to 30 years in prison, plus restitition upon sentencing, scheduled for May 14th.

Christopher Jared Warren, 26, of Sacramento, California, who fled the country February 3rd while facing fraud charges, was apprehended yesteray at the Canadian border in upstate New York with $70,000 in cash stuffed into his boots. Until his disappearance, Warren had been cooperating with authorities who were investigating mortgage & investment fraud allegations involving Loomis Wealth Solutions, based in Roseville, California, and several related companies. Authorities promptly charged him with conspiracy, fraud and conducting a continuing financial crime. Two other associates also fled, Garret Griffith Gililland III, now in custody and Scott Edward Cavell, who is still at large.

Wednesday, February 11, 2009

Glenn Marshall, 59, and the former chairman of the Mashpee Wampanoag Tribe, pleaded guilty today to fraud and embezzlement charges in connection with illegal campaign contributions and embezzling tribal funds. Marshall faces between faces 46 to 57 months in prison upon sentencing, which is scheduled for May 7th.

Pamela Ruth Haynie, of Lampasas, Texas, has pleaded guilty to embezzling more than $500,000 over a ten-year period from the First Texas Bank branch where she worked. Specifically, she plead guilty to theft, embezzlement and misapplication by a bank employee. She faces up to 30 years in prison upon sentencing. Haynie had been an employee of the bank in various capacities and its affiliates for 18 years, most recently as an "assistant cashier." According to prosecutors, Haynie misappropriated some $515,000 via a series of fraudulent transfers through two accounts of relatives, then spending the money for her own benefit.

Authorities reported today that 5 individuals have been indicted on charges they defrauded investors by manipulating the stock price of 3 publicly traded companies to the tune of $41 million. The five include: G. David Gordon, 47, attorney from Tulsa; Richard Clark, 61, of Tulsa; James Reskin, 60, of Louisville, Kentucky; Dean Sheptycki, 41, of the Bahamas; and Joshua Wayne Lankford, 35, of Dallas, Texas. The companies in question include Deep Rock Oil & Gas, based in Tulsa; Global Beverage Solutions, formerly known as Peak Investments, also based in Tulsa; and National Storm Management Group, Inc., based in Glen Ellyn, Illinois. Specifically, the group has been indicted on charges including conspiracy to commit securities fraud, wire fraud and money laundering; nine counts of wire fraud, five counts of securities fraud and six counts of money laundering. Gordon was also charged with making a false statement. Prosecutors said that this case is related to that of Mark Byron Lindberg, 41, of Coppell, Texas, who plead guilty last year to felony counts of commit wire and securities fraud in connection with a scheme to inflate the stock price of a number of companies.

FBI Deputy Director John Pistole told the Senate Judiciary Committee today that there are 530 active corporate fraud cases that the agency is investigating. 38 of those cases are directly related to the current financial crises, according to Pistole. In addition, there are more than 1,800 mortgage fraud cases ongoing. Given the volume of mortgage fraud cases, Pistole told the Committee that they are not focusing on individual cases, but rather "industry professionals" who could be responsible for "hundreds of millions" in fraud.

According to documents filed with the Federal Elections Commission, Michael I. Sohn, 34, of Fairfield, Connecticut and the former aide to former congressman Christopher Shays, is accused of embezzling at least $190,000 from campaign coffers. The documents alleged that Sohn took $83,000 in campaign checks, $70,000 withdrawn from ATMs, $16,000 in payroll funds, $11,000 in cell phone charges and $11,000 in other unapproved spending. A grand jury has been convened to investigate the allegations.

William David Ramsbottom Jr., 43, of Macon, Georgia, has been charged in a 118-count indictment with racketeering, money laundering, bank fraud and forgery in connection with the alleged embezzlement of some $421,000 from real estate clients. Ramsbottom was a managing partner in two real estate management companies, including TheRamsbottom Company, and he is alleged to have diverted client rent monies and other funds for his own benefit. He is currently held on $110,000 bond at the Bibb County jail.

Authorities in California reported tonight that one of three fugitives in a $100 million mortgage fraud case was apprehended in Spain last October and is fighting extradition. Garret Griffith Gililland III, 27, of Chico, California, is described as the "right hand man" of Christopher Jared Warren, who is at the center of the fraud and is still at large along with another co-conspirator, Scott Edward Cavell. Authorities said that they could not release the information about Gililland's capture as the investigation was ongoing.

Tuesday, February 10, 2009

Richard "Dickie" F. Scruggs, the well known class action plaintiffs attorney from Mississippi, pleaded guilty today to mail fraud in connection with a scheme to bribe a state court judge. Scruggs, who earned hundreds of millions of dollars on a multi-billion dollar tobacco settlement, plead guilty last year to a separate scheme to bribe another state court judge in a case involving a dispute over $26.5 million in legal fees from a Hurricane Katrina insurance settlement case. He was disbarred in that case and is serving a 5 year sentence.

Evelyn Rivera, of Wellington, Florida and the owner of Asset Title LLC of West Palm Beach, Florida, was sentenced Friday to 5 years in prison for her role in a mortgage fraud scheme that netted $18.5 million. Rivera had plead guilty to the fraud, which involved fraudulent mortgages on 55 condominiums in Fort Lauderdale. Two other conspirators in the scheme, Mike Acosta, a licensed property appraiser, and William Louisma, a recruiter of straw buyers, were also convicted for their roles in the scheme. Acosta was sentenced to 41 months in prison, and Louisma was sentenced to 46 months.

Debra Kay Kirby, 54, of Taylorville, Illinois, and a former employee of the Illinois state treasurer's office, has been sentenced to 30 months in prison for stealing some $750,000 from the state. Kirby, who was indicted for the theft last April, had been employed by the state from 1973 until 2006 when she retired. According to prosecutors, Kirby set up a bank account in October 2005 under the false name, "Debo Craft," and transferred money from state coffers into that account. Prosecutors also contend that she returned all but $263,000 in an effort to cover up the theft. She had plead guilty to wire fraud and money laundering charges in August and agreed to make restitution.

Jean G. Saint-Joy, 25, a/k/a Gary Saint-Joy, a/k/a Garry Saint-Joy, a citizen of Haiti and employed as a cashier at the US Embassy in Port-au-Prince, Haiti, has plead guilty to one count of theft of nearly $850,000 from the US State Department. According to prosecutors, Saint-Joy submitted fraudulent documentation for reimbursements starting in or about 2003 and continuing until early 2008. He also obtained cash advances fraudulently. Saint-Joy faces 10 years in prison, plus a fine of $250,000 upon sentencing which is scheduled for May 26, 2009.

Christopher Jared Warren, 27, of Sacramento, California, and currently a fugitive, has been formally charged with defrauding investors and financial institutions in a $100 million mortgage fraud and investment scheme. Warren, who was an executive of Loomis Wealth Solutions, and Triduanum Financial, based in Roseville, California, is alleged to have made fraudulent loan applications submitted to financial institutions involving some 500 properties in at least five states. According to his arrest warrant, Warren used the alias, Mark A. Seagrave, when he fled to Mexico. Prosecutors also allege that Warren solicited investors via seminars, encouraging individual investors to use funds from their home equity and retirement plans, to invest in the company in what prosecutors described as a Ponzi scheme. Warren reportedly chartered an aircraft for $156,000 to fly to Mexico, where he is believed to be in hiding. According to prosecutors, Warren had been cooperating with the investigation and had posted a lengthy confession on the triduanum web site, which is no longer up, prior to his fleeing last week. Another individual charged in relation to this case is Garret Griffith Gililland III, 27, of Chico, California, who is also a fugitive and believed to have fled the US. A third defendant, Scott Edward Cavell, 25, of Sacramento, California, has been charged with conspiracy to commit bank and mail fraud in this case. Cavell, also a fugitive, has used the alias of Adam Kingsbury Curry.

RESTORING INTERNATIONAL CONFIDENCE IN AMERICAN MBS/CMBS/ABSINVESTMENT SYSTEMBY: CHRISTOPHER JARED WARRENA. ResumeBefore diving into the heart of what is wrong, why its wrong, and what is needed to fix it, I mustspeak on my qualifications for this dissertation to substantiate my arguments. My name isChristopher Jared Warren, and in 2001 I was hired as a 19 year old to become a sales AccountExecutive for ACC Capital Holdings subsidiary, the now infamous “Ameriquest MortgageCompany”. Over the next three years of employment, I became the shining star of “portfolioretention”, a predatory division that would specialize in refinancing home owners who JUST gotloans from Ameriquest in the last 24 months. I was the number one producer in the region over60% of the time I was there, the company sent me to management training in Orange CA twice,trips to the Super bowl twice, Hawaii and Las Vegas based on my large production statistics andpaychecks. Most moths I would individually sell more then $5,000,000 in volume and bring inover $30,000 in net income……typically ore then 15 loans with more then 3 points and all rateshigher then 7.00% - much higher then industry standard at the time and not to mention not badfor a 19-22 year old kid with no degree. As a19 then 20 year old boy, my managers and handlerstaught me the ins and outs of mortgage fraud, drugs, sex, and money, money, and more money.My friend and manager handed out crystal methamphetamine to loan officers in a bid to keepthem up and at work longer hours. At any given moment inside the restrooms - cocaine and methwas being snorted by my estimates more than a third of the staff, and more than half the staffmanipulating documents to get loans to fund and more then 75% just completely made falsestatements on 1003s regarding stated income etc to get loans funded. A typical welcome aboardgift was a pair of scissors, tape, and white out, three things a loan officer or financial professionalshould never need.. Of course no where in training OR in management training did this 20 yearold ever learn that false statements on a 1003 were a federal offense. Overall in the two and halfyears I was at Ameriquest I funded over $90,000,000 in mortgages, of which more then$75,000,000 contained some sorts of material frauds undetected by management and funders.However, near the end of my employment there, I had hacked the computer systems run byEMPOWER for Ameriquest and was clearing my own funding conditions with nodocumentation, literally waiving file conditions as if I were an underwriter. The day I left I leftwith the entire customer database. I had made over $700,000 I was 22 had beat their system, hadgotten paid and ripped off one of the largest private companies in the worlds entire customerdatabase.So what to do with 680,000 Ameriquest customer private information? Well………..start amortgage company and offer better rates and lower fees then AMC. So at the ripe old age of 22, Ifounded a mortgage brokerage/bank - WTL FINANCIAL INC., at 22, a fraudster trained by thebest corporate environment for fraud, I built a company modeled after the movie boiler room andgot WTL licensed in OR CA, MN, CT, RI, FL as a mortgage banking company. From 2004 untilits grand 2007 collapse, WTL killed it. As a 22, 23, and 24 year old with no credentials I madeover $2.25m all of which was spent on 24 cars(at 26 the number is only 31 total), 5 houses,drugs, 1 engagement and split, 1 300 person wedding, 2 kids. Our company boasted region-best30,000 square feet, 120 employees, and handling a monthly gross revenue over $5m. Fraud wasrampant. We found investors that were not re-pulling credit reports, so we would change a 500fico to a 700 fico, a person in foreclosure and make It look like they were never late, fake w2s,pay stubs, bank statements, verification of deposits, none of which was being re-verified. Theseinvestors, who were securitizing these assets as AAA rated were not even verifying anything inthe files? I am sure that their investors were assured everything from correspondents was beingaudited. Every time a lender caught a file we would “fire” the employee produce terminationpaperwork to the investor, and re-hire the employee under a different alias. Over the course ofthe 3 years, over $810,000,000 in mortgage backed securities originated from my companies.That’s a 24 year old selling a billion dollars in bad mbs securities which by 2008 were in defaultwith out doubt. With the collapse of sub prime giant New Century, came our defeat, as we weretoo big and too stiff to be agile enough to change.So then in 2007 I diversified. I knew everything at the age of 25 about mortgage banking,origination, funding, reselling securities, underwriting. It was time to learn new things: moneylaundering, escrow company management, real estate, flipping, lease-backs, joint ventures, llcunit capital offerings. I found my place to learn AFG HOLDINGS COMPANY, the parentcompany of LOOMIS WEALTH SOLUTIONS, AFP of California LLC., AFG Technologies,and Nationwide Lending Corp(their mortgage banking division). I started as the general managerfor the mortgage company, turning it around in 90 days. When I showed up they hadn’t funded aloan in 66 days, they had no warehouse line and no investors. Within 90 days NLG was fundingagain, with a warehouse line, investors like Indymac, Lehman Brothers, and CITI MortgageCorp. The trick to this company was simple: AFG would partner with developers and buy realestate at 50 cents on the dollar, then sell it to his “financial consulting” members for 80 cents onthe dollar, wed appraise the properties at 100 cents on the dollar artificially inflate the purchaseprices so the loans were at 80 AFG would credit back the down and the closing costs. AFGwould net 25 points per closing and promise the buyers they would oer the mortgage payment,property management and even buy them free life insurance policy if they bought enoughhouses. This is what you call a classic panzi scheme because it requires exponential growth tocontinue. Words I never knew or understood prior to my experience there. Even in that volatileand crunching down market, fraud was still easy to execute. Another $44m funded while Imanaged the firm, until I got kicked out for starting my own title and escrow company. Thecomplete operation was highly illegal and a form of a panzi scheme. Still, I had no problems orresistance in getting close to fifty million in mortgages purchased and closed. Loomis Wealthand AFG Holdings ended up getting indicted by the Department of Justice after extensiveinvestigation by the FBI and the IRS. There is currently an investigation into my role with thisfirm and likely I myself will be indicted.Built a fraudster by my trainers in corporate America. Mastered the fraud. Trained others in thefraud. Paid by the fraud. Mastered mortgage banking, escrow, real estate. Every scam possible:fraud for profit, fraud to fund loans for the under-qualified, fraud of evasion of taxes, reverseflipping, flipping, false liens, software manipulation.And it utterly disgusts me. Looking back at the life I have led, I beg a higher power forforgiveness. For mercy. For I got caught up, my first corporate experience taught me fraud mixedwith drugs and money. The very top ranks of the corporate ladders knew what was going on.“When a pool of loans gets audited they will audit less then 10% of that bulk pool, and if theyfind a loan with misreps we simply replace it with a loan from another pool and put the bad loanback in to another pool and hope it wont get audited”2002 Vice President of Collateral –Ameriquest Mortgage in Orange, CA. But its always the small guy, the kid, the kid off the streetwith no college degree no ethics training no nothing they teach how to do their dirt, like a gangrecruiting a minor who will only go to juvy. I was only rewarded for my actions. Trips, over 16trophies from AMC alone, prizes and huge paychecks. I am disgusted. This is the reasonAmerican Mortgage Backed Securities and ABS pools are being hammered and default rates areat heir highest level. And what has been bred is a new generation of younger fraudsters that areyoung, technology adapt, and much quick and innovative then their two generation oldercounter-part regulators and regulation authors.And it is around that final point that is the center for this memo on mortgage fraud itsconsequences and final solution: the disparity between the talent of the regulators and thefraudsters. The age plays into it. The ambition and drive plays into it. The technology plays intoit. But still, if you could only put the correct people at the top of regulation, writing the regmanuals and enforcing them to 100% on pre-purchasing of assets by the government, you couldliterally cut mortgage fraud down so massively that you could see a return to below traditionallyacceptable foreclosure rates, somewhere in the 1.5 – 2.5% range vs the typically accepted rangeof 3-5% and the current level of 13.9% and in California, FL, NV over 21%. That’s right,eliminate mortgage fraud. Completely. Forever.And if it doesn’t happen, this economic downturn which was entirely started by mortgagefraud(well get into that in a minute) will continue to plague us and housing will not get a solidfooting in housing again because currently I would speculate that over 40% of mortgagesecuritizations today in Q1 2009 have some form of misrepresentation on them, whether detectedor undetected. If you fix MBS and ABS securities, you will re-ignite performance and foreignand domestic investors will believe again in a broken system, putting back much needed cashinto the system to increase liquidity, balance sheet, and the overall economic production of thenation.I helped ruin this nations economy. Almost a billion dollars of toxic assets came from memaking others above me rich beyond my imagination. They asked for more and more,knowingly, and I gave it to them. Now I intend to fix it and help the best I can by sharing what Ihave learned and know. I am the best at what I was taught and then re-created again and againand mastered myself. I am the best man for shutting it down. Completely and forever.2. The Heart of The ProblemThe credit crisis. The recession. The total fall out of investors foreign and domestic fleeing fromonce-loved American ABS and MBS securities. The fall out of the this has spread to a lack ofliquidity from home owners to corporations, affecting everything from gas to employmentfigures, to the auto industry. The current state of the financial markets as of Q1 09 entirely has itsroots in the mortgage and real estate collapse which in turn crippled and effectively killed thecredit markets. When the problems first started arising in 2006, economic experts predicted thatthe problem was only a “sub prime” and “alt a” problem that would stay confined to thecompanies like Long Beach Mortgage, Ameriquest, New Century, ABC Mortgage, Indymac,those companies that insured, purchased, and securitized loans with horrible underwritingguidelines. The problem was this: it wasn’t just these independent or subsidiary companies at all.Deutche Bank, Merryl Lynch, Citi Group, all were purchasing insanely high volumes of fundedloans with horrible underwriting guidelines that would have made an underwriter from the 70s or80s complete scream at the top of his lungs in concern. But its not just the underwritingguidelines that caused this, because that is already fixed by Q1 09. In today's current climate,underwriting guidelines are where they should be. Full documentation on income, lower levels ofdebt allowed vs your income, and more needed for down payments or more equity to beapproved for a refinance. All this being done, still does not come close to fixing the problem.Now, more then ever, in this market, as an industry insider I see more fraud happening now thenin 2005. More fraud. Bigger fraud. Bigger profits. More defaults and foreclosure. So theunderwriting is fixed but the industry still cannot improve the performance of their mortgagebacked securities.The problem is mortgage fraud has morphed, and will never ever bee a stagnate thing. Theregulators, managers, qc department employees, guideline writers, and board members ofmortgage lending institutions and banks are all, when averaged, over the age of forty seven. Theaverage mortgage fraudster is in mid twenties to early thirties. Most fraudsters are completeidiots, as they are just the typical criminal, that have found a different arena to smash around in.They are the easy ones to find: first payment defaults, obvious white out on documents, 1003sthat don’t match Super pages or cant pass a Veri-tax.com Mortgage Fraud Report. The currentsystem is good at catching these gentlemen and ladies. The problem is the 5% of fraudsters outthere there are extremely intelligent, agile, and constantly innovating techniques to beat everyeffort of the anti-fraud forces in the banking industry. Age plays into this, because the youth isinnovative and aggressive, and as we age and approach AARP land, we become less nimble inour mind, closed to new ideas.I actually had an FBI agent ask me “how in this market with all the changes is it even stillpossible to get cash back on a purchase”. Any FBI agent who has to ask that question, shouldn’tbe involved in a mortgage fraud investigation, period. This example brings us the secondproblem, and that’s the individuals fighting fraud are doing it completely backwards and with thewrong skill-sets. Mortgage fraud can be, should be, and is desperately needed to be fought fromthe front, aggressively stopping mortgage fraud before the funding date by a special division, anationwide division, that is focused on mortgage data, title and records, and streaminginformation from investors, funders, and originators. Mortgage fraud currently is regulated byprosecution. This is unacceptable.Lastly there is way too much duplication in our current system of collateralized lending andmortgage securitization. This leads to poor performance, fragmented information sharing if anyat all, and low securities performance. The fact is simple that with the nationalization of Freddieand Fannie that is four government-owned agencies that are purchasing and/or insuring over96.5% of the mortgage fundings on residences in America. That is so beyond against theconstitution, but mandatory in todays market. We must realize that subsidy is the savior fromdepression, which can easily be accepted once studied. But if the government if this country isgoing to be this big of a player on the nations biggest natural resource: American land andlending on that land, then it absolutely and unequivocally cannot run it like it runs most of itsbureaucracy's: inefficiently. It has to be streamlined. It has to be non-duplicated in roles andresponsibilities. It has to have its own internal mechanisms of regulations and controls andchecks and balances.Why are there THREE institutions that do the EXACT same thing for the federal governmentand the three boards and senior managements of those firms take out over $200m a year incompensation when the companies are losing money? Why is the performance of the securitiessuffer so much? Because they aren’t doing it right and haven’t been. The answer is simple: themortgage industry fell behind the technology industry department, and never caught up, and ithas cost them and now the entire country greatly, in the trillions of dollars.The philosophy is wrong: instead of regulation by prosecution it should be regulation to preventfraudulent fundings. This has to change first and foremost. When your at war, and trust me, thisis a financial war with huge consequences(fraud losses topping over ¾ of a trillion dollars in2008), you don’t wait for the opposing enemy to bomb, then invade your home towns and thenafter they have burned your bridges and farms and houses drop a nuke on your own home townto kill them. That is the equivalent of our current regulation. Let the fraudsters do fraud, theyfund a bunch of bad loans, and after the losses have piled high enough then and only then do wego in a tear it all up. You have to catch them upfront. Its possible. The current staffing,regulators, and investors simply are too under-qualified, under-trained, and not coordinated witheach other enough to make it happen. Their solution is fancy computer modular software thatgives you “mortgage fraud scores” or “avm modules” to “reconcile discrepancies”. Its allbullshit, I have beaten those computer models time and time again and other fraudsters knowhow to as well and you will continue to see the same results if the same regulators, regulationwriters, and enforces stay in place that exist today.The analysis is wrong: many times FBI agents who just got transferred from narcotic divisions orinternational assignments are put on mortgage fraud with absolutely no background. It has takenme ten years of learning to get to where I am and I would consider myself an extremely capableand fast learner far above average and anyone with less then five experience has no right leadingor working a mortgage fraud case. Mortgage fraud cases MUST be worked by industry insiders.And while there must be oversight and traditional law enforcement structure and attorneys at thetop and managing it, those insiders must be younger or show extreme signs of quick learningability and/or demonstrate knowledge of today's advanced fraud techniques. Its a very basicprinciple that each generation that comes up through the professional world takes the work fromthe previous generation and makes strides to improve the efficiencies, technologies, and methodsof the generation before them. The industry must self regulate with law enforcement assistancewith the help of the generation and industry insiders. Meaning if a majority of the fraud is beingcommitted by 20-30 year olds inside the industry utilizing highly technological techniques whydo you have 40-60 year olds who don't understand the technology who got transferred to thistype of work from interstate commerce, traditional banking, narcotics,etc? You wouldn't andyou shouldn't. As previously stated, traditional law enforcement figures are fine for oversightand management but you must leverage the best from the other side against themselves,increasing efficiency bringing in the newer fresher though processes with a better and moreconcrete understanding of the business and the fraud. The bigger and more elaborate thefraudster, the better permanent asset that individual could be if flipped into a consultant and/oremployee for the federal government, specifically the Department of Justice and the MortgageFraud tasks forces.The time is wrong: the FBI and DOJ are prosecuting their regulation. This is incorrect becauseby being reactive instead of proactive you are allowing massive frauds to occur for billions andbillions of dollars in losses and damages further pushing MBS and ABS ratings into the dump,and eroding investor confidence in the securities. You regulate by doing just that, regulating.Increase efficiencies and processes, require more burden of proof prior to loan funding and resaleon capital markets. Operate under the assumption that every mortgage application is beingprocessed by a fraudulent borrower, loan officer, processor, or underwriter. Assume that thecomputer technology being used by investors and mortgage banking institutions are inadequateand are already being beaten by fraudsters, because they are. Assume nothing works and that nomatter what the "representations and warrants" are of a warehouse lender, the correspondentlender, or the Freddie Mac or Fannie Mae seller, that is not good enough and there is truly noamount of net worth or security can cover a 50% default or fraud rating.Change the philosophy change the analysis, change the team and/or add a lot of new team mates,and change the timing of regulation.C. Executing Change and Expected Results, A Return to Stability in SecuritiesJust on the platform that our new commander in chief used, the time for change is now. You canrestore confidence in MBS and ABS, and REITS, and American investing by eliminating fraud.Today the guidelines have been fixed, but the fraud hasn't, and it has worsened. As more andmore loan officers go broke and more and more real estate professionals go broke they areturning to fraud to fund deals and raise money. Eliminate fraud and you lower delinquencies, getrid of foreclosures restore confidence in securities, restore confidence and the credit markets arerestored, and with credit markets restored the rest of the economy will utilize much neededfacilities and regain a solid footing once again. Literally you can fix the majority of the problemsby regulation and eliminating fraud. Streamlining effeciencies must be the first step by mergingthe four government agencies into two(Freddie, Fannie, Ginnie, and HUD) into two (HUD andFreddie) and have Freddie absorb FNMA and Ginnie Mae. Immediately cutting overhead andcosts by over 60% and reducing the staffing and overhead costs, hence increasing profitabilityfor the government to help offset costs of future defaults of all the mortgages booked prior theexecution of a business plan modeled after this memo.Next step is to increase the information sharing by all agencies and utilize a platform as aninformation verification center. MERS is a perfect government-sponsored entity is the perfectentity for this. It is already used as an anti-fraud and mortgage transferree platform by all fourgovernment investment houses, all major mortgage funding sources, and a majority ofcorrespondent lenders. Expand its access to include title searching capabilities, access to all IRSdocumentation, and access to FDIC depository records and SEC holding records to verificationof assets independent from the origination processes. Use this verification platform to build thesecurity, as opposed to utilizing documentation provided by borrower and/or originator. Whilethis will be the most expensive and very costly endeavour, it pales in comparison to the hundredsof billions of dollars spent on curing and/or selling toxic assets insured by the tax payers at aloss. Even at a cost of $1b the return on investment will be over 1000%.Then infuse talent to any and all federal mortgage fraud investigations currently in process, andmandate co-operation by all lenders and investment companies for the new blood to have accessto files prior to funding and pipeline reviews - truly regulating pipelines and helping findcriminals prior to funding. Have all Suspicious Activity Reports filed in regards to mortgageactivity immediately diverted to the new task forces force teams. Just as any part of the FBI youbring in talent on every level, low level, mid level, and management. Not to replace but to act inconcert, provide guidance and speciality information to assist with the cases, and identify andprevent mortgage fraud in action before fundings occur, bringing regulation to pro-active insteadof re-active.Following this steps increases efficiency, saves billions of dollars, gets the right people in theright place, utilizes the talent of the people that actually know what to look for, and will bringdefaults caused by fraud down to acceptable levels: 0-1%. At a maximum. This is what iswrong and how to fix it. I am the man for the job, Chris Warren, have the managementexperience, the banking experience, and could assist in the oversight of the most majortransformation of mortgage regulation without changing one guideline and still completelyeliminate mortgage fraud and restore confidence in the American dream and the securities thatthat very dream provides for investors. The performance of the securities improves, the fundswill come back, the government can re-sell off positions in Freddie Mac, or keep possession andreturn to massive profitability which could act as a huge profit center to help pay for manyneeded budget and defecit shortfalls and provides answers for the overall performance of thenational budget and economy.Christopher Jared Warren

About the Author - Chris Marquet

Chris Marquet is Chairman & CEO of Marquet International, a boutique investigations, business intelligence and litigation support firm he founded in 2006, based in the Boston area. Chris has over 30 years of professional experience in industry with Marquet International and prior stints with Kroll Associates, Citigate Global Intelligence and Decision Strategies/Vance International.
Chris is the author of many articles and white papers, including the annual Marquet Report on Embezzlement as well as the Marquet Report on Ponzi Schemes. He has lectured extensively on subjects relating to employee misconduct; due diligence; business intelligence, internal investigations, fraud, employee integrity, workplace violence, kidnapping, terrorism, crisis management and travel security.
Chris is a Certified Board Advisor and Board Member for the Center for Strategic Business Integrity. He received an A.B. degree from Dartmouth College in 1983, with a triple major in Physics, Economics, and Philosophy.
He can be reached at chris@marquetinternational.com